SA’s Newscastle dilemma: Decent work vs. no jobs

By Greg Nicolson• 4 February 2013

Is it not better to have low-paying jobs than no jobs at all? That’s not only a central question in the court case between KwaZulu-Natal manufacturers and the Department of Labour, but also one of the central conflicts in the drama of South Africa’s economy. By GREG NICOLSON.

The debate has been set and each side has presented its case. Arguing for lower wages we have a group of clothing and textile manufacturers who were lured from Asia by Apartheid-era incentives to open shop in Newcastle, KwaZulu-Natal. Economists have supported their claim that if they are forced to meet minimum wage requirements agreed to by wealthier clothing manufacturers, they will go bust and their employees will be out of work.

Arguing for wage increases is an alliance of government, organised labour and a bargaining council. They want a “living wage” and better conditions to free workers from what they see as slave-like conditions condemning them to poverty.

The setting is the KwaZulu-Natal High Court. Five business owners have challenged the minister of labour’s decision to extend minimum wage agreements set by the National Bargaining Council for the Clothing and Manufacturing Industry (NBC) to organisations that are not members of the NBC. The business owners are reported as Chinese, but many have been in the country for decades. Their community, Newcastle, already has an unemployment rate of around 60% and four of the five companies challenging the government say they have will close if forced to increase wages.

The ruling, however, will affect 450 non-compliant firms across the country and their 16,700 employees. The theatre, then, is national and the play touches at the heart of the debate between “decent work” versus no work at all.

The companies taking the minister to court – Valuline, Africa HK Manufacturing, Satcotrade, JCR Clothing and Gold Shu-Lin Clothing – have looked to the Promotion of Administrative Justice Act in their bid to set aside the decision of the minister. As they are not members of the bargaining council, and nor did the minister consult them before they were forced to meet minimum wage requirements, they shouldn’t be subjected to its wage decisions, they argue. The companies believe rights such as freedom to trade, equality and association have been infringed and the minister failed to take note of the potential factory closures and job losses.

In an affidavit to the court, Valuline manager Han-Wei Chen said, “The decision by the minister has an adverse impact on the rights of workers employed by the applicants in that the factories will be forced to close down and workers will lose their jobs and their ability to support themselves.”

The worry is warranted. In only a decade, South Africa’s clothing and textiles industry has shed almost 200,000 jobs, from about 240,000 down to 55,000, largely to more competitive labour markets. The five firms cite a study by Econex Economic Consulting which predicts 6,500 to 22,000 jobs could be lost if the minimum wage is extended across the sector.

A report from University of Cape Town economists Ann Bernstein and Nicoli Nattrass, which has received much attention since its release last week, offers more detail. “The Newcastle case shows how, under the guise of promoting ‘decent work’ and the supposed leveling of the playing field for producers, an unholy coalition of a trade union, some employers and the state can initiate and drive a process of structural adjustment that undermines labour-intensive employment and exports South African jobs to lower-wage countries such as Lesotho and China,” write Bernstein and Nattrass. They argue that labour-intensive producers of low-cost goods are being lumped in with firms who produce higher-quality goods and have higher profit margins and can afford to pay their workers more.

Bernstein and Nattrass predict that the jobs of 16,700 workers are at stake. They support the employers’ calls for paying workers according to productivity, including piecework payments and bonuses for exceeding quotas. They are concerned forcing employers to meet minimum wages which the more profitable and mechanised firms offer will destroy the labour-intensive sector.

“South Africa needs a more differentiated approach to wage-setting that enforces basic standards of employment but tolerates low-wage employment. Allowing low-wage producers in places like Newcastle to continue to exist will not harm jobs in the upper-end of the industry. Instead, it will accommodate the needs of low-skilled workers, the unemployed and poorer consumers who purchase basic clothing rather than the pricier, branded, fast fashion products,” write Bernstein and Nattrass.

But many would find it hard to tolerate producers who set wages and working conditions that compete with China, Lesotho, Bangladesh and Pakistan. The South African Clothing and Textiles Workers’ Union (Sactwu) says employees in non-compliant firms are being paid R250 to R400 a week, below the R534 benchmark set by the NBC and Department of Labour, and in the vicinity of wages farm workers in the Western Cape have been violently protesting against.

Sactwu general secretary Andre Kriel says there is a direct and “dirty” link between low wages and terrible working conditions. “The union sees the case by Newcastle factories as an insidious threat, not only to collective bargaining, but also to the very core of the principle of decent work,” he told Business Day. “For if the court accepts the position of Newcastle factories, we believe we will witness the systematic spread of ‘Newcastlesque’ wage and human-rights abuses across the country, and eventually across industries,” said Kriel. “When workers have little value, they are treated as worthless.”

Bernstein and Nattrass’s report does not fail to draw attention to some of the shocking abuses of workers that have occurred in the area, prompting authorities’ crusade of change. “In one infamous case, a worker gave birth to twins during a night shift, both of whom died because the owner could not be reached and relatives could not access the locked factory. This prompted the Department of Labour to inspect Newcastle clothing factories, finding other instances of abuse. It also prompted Sactwu to launch its ‘operation clean-up’ to end sweatshop conditions in the area,” write Bernstein and Nattrass.

The widespread abuses were part of the culture that has kept unions and businesses from negotiations. Cosatu Gauteng last week spoke out against the employers, comparing their wage aims to Apartheid policies. “We condemn these minority employers who intend to subject workers to poverty and slave wages. We know for the fact that there are some bigger political forces behind them that support them both financially and morally to wage a political campaign against our government and to the collective bargaining framework. Their challenge smells of apartheid tendencies which think that to subject workers and black workers in particular to slave wages,” said provincial chair Dumisani Dakili.

His KwaZulu-Natal counterpart, Zet Luzipo, accused the clothing manufacturers of trying to skip proper procedure. Luzipo told media the employers could apply to the Department of Labour to pay lower wages if they were in financial strife, but they did not want to disclose open their books for an assessment.

Judgment has been reserved in the KwaZulu-Natal High Court, and is expected to be delivered in the coming months, but the debate will continue. At its heart is not just clothing and textiles but the trajectory of the South African economy and the answer to the question: how will we reduce unemployment? Government has repeatedly parroted the unions calling for decent work for all who want it. That’s what has led to the focus on the high-end clothing manufacturers to the expense of the lower end, with loses of hundreds of thousands of jobs as a result

But the push for decent work essentially requires industries to develop and transform, creating new jobs quite unlike those the Apartheid government encouraged among black workers. Still, those new jobs remain uncertain and dependent on effective government policy. Is it not better to have low-paying jobs than no jobs at all? That’s the central question in the current court case, and the one of the central conflicts in the drama of South Africa’s economy. A clear decision on the issue could significantly determine the future of this country. DM